Tag Archives: subprime

Breaking news: Countrywide’s Mozilo reportedly off the hook for all those subprime mortgages

Oh, wow! Crime does pay! A big slap in the face to Countrywide whistleblower, Michael Winston. Unbelievable!!!

One of most notorious people at the center of the housing crisis is reportedly off the hook for any supposed malfeasance, as Bloomberg is reporting that the Department of Justice is abandoning its attempt to sue Angelo Mozilo, the founder ofCountrywide, for his company’s lending practices in the run-up to the housing crisis.

Countrywide originated more mortgages in this country from 2004 to 2007 than any other lender. During that time, Countrywide closed so many subprime mortgages it remained a top-5 producer for that home loan product. The same goes for other loans, such as Alt-A.

The DOJ first began seeking a civil suit against Mozilo two years ago, after the statute of limitations expired for any criminal charges that could have been filed against Countrywide’s founder.

Mozilo long held that Countrywide “didn’t do anything wrong” when it came to the lender’s underwriting and origination practices.

In 2014, Mozilo told Bloomberg that he felt his company was not to blame for the subprime mortgage crisis.

“You’ll have to ask those people, ‘What do you have against Mozilo, what did he do?’” Mozilo said in 2014.

“Countrywide didn’t change. I didn’t change. The world changed,” he continued. “No, no, no, we didn’t do anything wrong,” he said, adding that a real estate collapse was the root of the crisis. “Countrywide or Mozilo didn’t cause any of that.”

And now, it appears that the DOJ is unable or unwilling to proceed with its case against Mozilo.

From Bloomberg:

U.S. prosecutors have abandoned their case against Angelo Mozilo, a pioneer of the risky subprime mortgages that fueled the financial crisis, after a two-year quest to bring a civil suit against him.

The Justice Department has decided not to sue Mozilo, the co-founder of Countrywide Financial Corp., according to people familiar with the matter. That effectively ends nearly a decade of U.S. scrutiny of a man who became a face of risky lending practices and later an emblem of the government’s mixed success in holding individuals accountable.

Read on.

Bonds backed by car loans made to subprime borrowers are showing cracks

This is the next US problem..

The market for bonds backed by car loans made to borrowers with low credit ratings is beginning to show some cracks.

Delinquencies on U.S. subprime auto asset-backed securities (ABS) climbed to a 20-year high in February, exceeding the levels seen in 2009 following the financial crisis, Fitch Ratings warned on Monday.

The number of subprime delinquencies of 60 days or more hit 5.16% in February, said Fitch, its highest level since October of 1996, when it hit 5.96%. The February number is 11.6% above February of 2015, and up 3.63% from January.

Read on.

TRUMP MORTGAGE FLOP TIED TO CREDENTIALS FLAP

This a 2007 article on NY Post:

 

As the mortgage mess widens, Donald Trump has pulled the plug on Trump Mortgage less than two years after its launch.

Plagued by bad timing and the disclosure that the firm’s chief executive, E.J. Ridings, had inflated his credentials, the outfit never came close to reaching its financial goals, according to a report today in Crain’s New York Business.

Instead of doing $3 billion in deals as promised, it barely reached the $1 billion level, the report said.

Trump played down his role in Trump Mortgage, saying it was just a licensing deal and he didn’t have an ownership stake.

Trump is, however, licensing his name to First Meridian Mortgage, a lender that is being renamed Trump Financial.

And here is Trump Financial press release in 2007:

THE TRUMP ORGANIZATION AND FIRST MERIDIAN MORTGAGE ANNOUNCE THE FORMATION OF TRUMP FINANCIAL NEW YORK, NY JUNE 27, 2007 – The Trump Organization is pleased to announce an exclusive strategic alliance with First Meridian Mortgage and the formation of a new entity to operate as Trump Financial. Trump Financial will offer its prospective clients an array of financial products and services while at the same time remaining focused on First Meridian’s expertise in the residential mortgage arena.

Since its founding in 1991, First Meridian has developed an excellent reputation for providing the highest quality service at the most competitive prices as well as introducing innovative loan products for individual borrowers and real estate developers. Over the years, First Meridian has experienced steady growth in its mortgage applications and closings, making it one of the fastest growing mortgage banking companies in the country. Led by its entrepreneurial Founder and CEO, David Brecher, First Meridian has established a foothold in prime real estate areas such as New York, South Florida, Connecticut, California, Washington D.C., Pennsylvania, New Jersey, Virginia and Massachusetts. First Meridian is a licensed mortgage banker in 12 states (NY, NJ, CT, FL, CA, PA, MA, DC, MD, IL, VA, and MN) and has established a strong name in the real estate financing industry for its outstanding service, professionalism and integrity.

Trump Financial will combine the strengths of The Trump Organization with First Meridian’s expertise in the residential mortgage sector to become a leader in the financial services industry. The success of Trump Financial will be achieved by a team of professionals who thoroughly adhere to standards set by Mr. Trump himself. It will offer its clients first-class service accessible to all, careful attention to detail, creative thinking, constant client interaction and feedback, an overall “white glove” business experience, and above all else, impeccable integrity.

“First Meridian is proud to be a part of The Trump Organization family and will strive to capitalize on this unique opportunity and ensure the success of this venture”, Brecher said. For more information about Trump Financial or about this press-release, please call (866) 796-7523 or email info@trumpfin.com.

And more fromThe Fiscal Times:

If you were to pick the worst possible time in American history to start a mortgage company, April 2006 would get a lot of consideration. That’s when The Donald held a press conference at Trump Tower for Trump Mortgage, right at the peak of the housing bubble. Just one month later, Ameriquest, one of the largest subprime lenders in the country, closed all its retail offices, an early warning of the collapse to come. 

But that April, Trump was characteristically upbeat, vowing that Trump Mortgage would become the nation’s top home lender. He told Maria Bartiromo, “I think it’s a great time to start a mortgage company,” adding, “who knows about financing better than I do?” 

Trump hired as chief executive of Trump Mortgage a man named E.J. Ridings, a friend of his son Donald Jr. Ridings boasted on the corporate website of being a “top executive at one of Wall Street’s most prestigious investment banks” with 15 years of financial industry experience. All of that turned out to be false; he was a registered stockbroker with Dean Witter Reynolds for a total of six days, and an entry-level loan originator at a boutique mortgage company for a little over a year. Ridings gamely ignored the embarrassing disclosures, telling Money magazine, “Trump Mortgage is going to be huge.” 

Six top executives left Trump Mortgage in the first six months. An initial sales goal of $3 billion in the first year was soon downgraded to under $1 billion. By August 2007,Trump Mortgage closed, one of hundreds of failed lenders in the wake of the housing crash. Unsurprisingly, Trump distanced himself from the implosion, saying he only licensed his name to it, and that “the mortgage business is not a business I particularly liked or wanted to be part of in a very big way.” 

Despite that coolness, Trump allowed his name to be licensed by First Meridian Mortgage for a second company, renamed Trump Financial. That too went out of business; the company reverted back to its original name. First Meridian wassubsequently accused of illegally fabricating mortgage assignments to foreclose on properties, and employing robo-signers to execute those faulty assignments. 

Trump was not done with the mortgage collapse, however. Twenty years earlier, hehelped save a woman’s farm from foreclosure. But a remarkable Los Angeles Timescolumn in December 2007 shows that Trump saw the latest iteration of foreclosure crisis not as a tragedy, but a business opportunity. 

 

Moody’s Fate in Subprime Probe to Be Decided Soon by U.S.

The U.S. Justice Department will decide in the next few months whether it will sue Moody’s Corp. for allegedly inflating ratings on mortgage bonds at the heart of the 2008 financial meltdown, according to people familiar with the matter.

The multiyear inquiry into Moody’s is among the remaining live investigations into the mortgage lenders, Wall Street banks and ratings firms that the government has sought to hold accountable for the subprime crisis. A year ago, ratings company Standard & Poor’s, a unit of McGraw Hill Financial Inc., paid $1.5 billion to resolve allegations that it had inflated mortgage-bond ratings to gain business during the housing boom.

Any case against Moody’s would be smaller than the one against S&P because the pool of Moody’s-rated securities at issue is smaller, one of the people said.

The government could sue Moody’s, reach a monetary settlement or close its investigation without taking action, according to one of the people familiar with the matter. A decision on how to proceed is probably a few months away, according to the people, who asked to be named because the investigation is confidential.

Read on.

GE gets subpoena over subprime mortgage operation

DOJ investigating whether General Electric broke any laws from 2005 to 2007

The Department of Justice subpoenaed General Electric’s records containing subprime mortgages from GE’s financial services business WMC Mortgage Corp.

On Friday, GE disclosed in its annual report, that its lending unit, GE Capital, and defunct subprime lending unit WMC, received the subpoenas in January.

According to Reuters:

The conglomerate said it learned in December that the department was probing purchase or sale of residential mortgage loans between Jan. 1, 2005 and Dec. 31, 2007.

“We will cooperate with the Justice Department’s investigation, which is at an early stage,” GE said in a filing on Friday.

According to the DOJ’s investigation, currently there are 14 lawsuits relating to pending mortgage loan repurchase claims with WMC.

Read on.

GE Says Justice Department Sent Subpoenas to GE Capital, WMC in Subprime Probe

The Justice Department has subpoenaed records concerning subprime mortgages from General Electric Co.’s financial services business, the company said in a securities filing, the latest indication of the long shadow the subprime boom has cast over lenders.

GE disclosed in its annual report, filed Friday, that its lending unit, GE Capital, and a former subsidiary that made subprime loans, WMC, received the subpoenas in January.

The records were sought in an industrywide Justice Department investigation of subprime mortgages, which is seeking to determine if federal laws were broken in the “origination, purchase or sale of residential mortgages” from 2005 through 2007, the company said. GE said it is cooperating with the investigation.

The Justice Department didn’t immediately respond to a call for comment.

Read on.

Video Surfaces of Hillary Clinton Blaming Homeowners for Financial Crisis

It is up to the voters to decide which Presidential candidate has a better plan to go over Wall Street execs and end the commercial banks from engaging in the investment business and not simply have the same repeated bank offenders to continue to pay a fine and sign a non-prosecution agreement in order to avoid jail time.

USUncut:

According to Hillary Clinton, if you were a victim of the foreclosure crisis, it was probably your fault.

The only problem with that argument is that it’s not even close to factually correct.

Clinton in 2007: Homeowners “should have known they were getting in over their heads”

When Clinton ran for president during her second term as New York’s U.S. Senator, she gave a tepid speech at the NASDAQ headquarters on December 5, 2007 — before the financial crisis reached a boiling point — about reforming Wall Street’s housing loan practices, largely excusing financial criminals for their behavior.

“Now these economic problems are certainly not all Wall Street’s fault – not by a long shot,” Clinton said early in the speech.

Clinton’s NASDAQ address amounted to essentially asking the financiers assembled to take voluntary action or else she would “consider legislation” to stop banks from kicking families out of their homes. But early on in the speech, Clinton placed equal blame for the subprime mortgage crisis on low-income homeowners alongside Wall Street.

“Homebuyers who paid extra fees to avoid documenting their income should have known they were getting in over their heads,” Clinton said.

One YouTube user found video of the statement and put it side-by-side with her claim at the first Democratic debate in which she said she went to Wall Street before the crisis and told them to “cut it out.”

I read a financial book a couple of years ago that discuss the 10 causes of the financial crisis. I posted some of the highlights on my Justice League blog in 2012:

I mentioned Credit Default Swaps are one of the causes of the financial crisis. Of course there are others. First, let’s talk about Securitization.

Securitization sounds like a great deal for anyone such as the banks, investors, and so on. But, the securitization of pools of mortgages into mortgage-backed securities (MBS) allowed banks to transfer risk to investors because banks no longer obliged to hold mortgages. This allowed banks and mortgage companies to originate more loans and make more money. The more money, the more profits for the banks. And securitization started to apply to other products such as car loans, student loans, credit card debt, and so on.

Second, subprime loans or liar loans.

Once securitization came to play, banks came up with other method of increasing their profits: Originate loans quickly and sell them off to the government, Fannie Mae and Freddie Mac, or to giant mortgage companies such as Countrywide, Option One, Washington Mutual, etc. and change the lending standards such as 0% down, no documentation of income or payment histories, etc.

Third, financial institutions that are deemed “Too Big To Fail.”

We now know which banks own the majority of the US economy: Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, and Goldman Sachs. I called them the “Five Families.” These five families according to Dallas Federal Reserve head own 56% of the US economy. Notice that Goldman Sachs was named with the rest of the four banks. Keep in mind that Goldman Sachs is an investment firm. And in 2008, Goldman Sachs as well as Morgan Stanley became a bank holding company. And of course, Litton Loans, a mortgage servicing company, was owned by Goldman Sachs before Goldman sold Litton Loan to Ocwen.

Fourth, derivatives

In December 2000, thanks to the banking lobbyists’ pressure, Senate passed Commodity Futures Modernization Act which allowed the banks and brokerages to create insurance-type products. Yes, we were introduced to insurance-like products called “Credit Default Swaps.” This product, because it was unregulated, allowed traders that worked for banks and insurance companies to place bets on everything including mortgages and even on products that didn’t own. The risker the bet, the higher the return. And thanks to the introduction of subprime loans, subprime loans were the riskiest.  this is what led to demise of Bear Stearns, Lehman Brothers, and AIG.

Fifth,  Residential and Commerical housing bubble

Certainly much of the blame of the residential and commerical housing bubble is Congress that resisted in reforming Freddie and Fannie rather allowing Freddie and Fannie to buy mortgages from lenders, securitized the loans into bonds, and selling those bonds to investors. As far as commerical mortgages, they were sliced up, securitized, and sold to investors  (i.e. state and municipal pension funds, non-profit foundations, etc.)

Sixth, Politicians wanting to stay in office and benefits from the financial crisis

It has been well known of the many ex- lawmakers and who have personal relationships with our current elected officials have fled to the career as a lobbyist. People who check their own former elected officials to see who is now a registered lobbyist as well as their current elected officials to see if he or she has any lobbyist that works in his or her office or writing his or her bills.

Seventh, Deregulation

After the Glass-Steagall Act, which was a bill in the Great Depression that prohibited commerical banks and investment banks merger, which officially ended regulation for the banks, this is why we had products such as “Credit Default Swaps’ to be unregulated and allow banks to hide liabilities and participate in high risk investments.

Eighth, Globalization

When each nation has its own set of rules for regulating and financial transactions of a company and that international company declares bankruptcy, it affects other companies globally and becomes a financial nightmare. Lehman Brothers’ bankruptcy is an example as many banks and investment firms globally sued to get back the billions that was invested in Lehman bonds and derivatives.

Nine, Credit Rating Agencies

The three major financial rating agencies—Moody’s, Standard & Poors, and Fitch are supposed to office non-biased rating on stocks and bonds. Right? Wrong. All three credit rating agencies gave Lehman Brothers bonds an “A” ratings right up to the day Lehman Brothers filed bankruptcy.

Ten, Federal Reserve Chairman Alan Greenspan

Remember Greenspan, the “godfather of the economy” or the man kept interest rates too low for too long that encouraged buyers to purchase homes in a bid-up market and the height of the housing bubble? This is the same Greenspan who opposed tighter regulation on derivatives and subprime mortgages, had faith in free markets to regulate themselves, and endorsed adjustable rate mortgages (ARM) that ending up being bad advice which left homeowners’ mortgages upside down and left holding the bag.

Yes, there are other individuals and entities to blame such as the Securities Exchange Commission, federal regulators, FDIC, Office of Thrift Supervision (OTS), Justice Department, Office of Comptroller of Currency, homeowners who took out those liar loans and knew that they couldn’t afford them, current Federal Reserve Chairman Ben Bernanke (when he took over Greenspan’s job) who never disclosed to the public the discount window loans given to the banks besides the $700 billion dollar taxpayer money to bail them out, Clinton Administration for allowing the deregulation, Bush Administration for escalating the deregulation which eventually crashed the economy, and so on. We can continue to discuss the causes of the global financial crisis. The real question is will we learn from this and will this be repeated again?